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Community insurance versus compulsory insurance: competing paradigms of no-fault accident compensation in New Zealand

Published online by Cambridge University Press:  15 May 2019

Simon Connell
Simon Connell*
Affiliation:
Faculty of Law, University of Otago, Otago, New Zealand
*
*Author email: [email protected]
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Abstract

This paper presents a history of New Zealand's accident compensation scheme as a struggle between two competing normative paradigms that justify the core reform of the replacement of civil actions for victims of personal injury with a comprehensive no-fault scheme. Under ‘community insurance’, the scheme represents the community taking moral and practical responsibility for members who are injured in accidents, while for ‘compulsory insurance’ the scheme is a specific form of compulsory accident insurance. Understanding the history of the scheme in this way helps explain both the persistence of the scheme and important changes made to it by different governments.

Keywords

tortsaccident compensationNew Zealandno-fault
Type
Research Article
Information
Legal Studies , Volume 39 , Issue 3 , September 2019 , pp. 499 - 516
Copyright
Copyright © The Society of Legal Scholars 2019 

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Footnotes

†

I wish to thank the anonymous reviewers for their helpful comments, Mike King for comments on a draft version of the paper and Andrew Geddis for suggesting some useful literature.

References

1 Accident Compensation Act 1972 (the 1972 Act) and its successors: the Accident Compensation Act 1982, Accident Rehabilitation Compensation and Insurance Act 1992, Accident Insurance Act 1998 and Injury Prevention, Compensation and Rehabilitation Act 2001 (later renamed the Accident Compensation Act 2001). For the sake of variety, the scheme implemented by these statutes is referred to herein as ‘ACC’, ‘the ACC scheme’ and ‘the scheme’.

2 The system is not dispute free, see Acclaim Otago Understanding the Problem: An Analysis of ACC Appeals Processes to Identify Barriers to Justice for Injured New Zealanders (Report supported by the New Zealand Law Foundation and University of Otago Legal Issues Centre, 2015) [207] and, by the same authors, see also ‘The idea of access to justice: reflections on New Zealand's accident compensation (or personal injury) system’ (2016) 33 Windsor YB Access Just 197 at 202.

3 With limited exceptions such as for injuries suffered during the commission of a serious criminal offence (s 122).

4 A person with an injury covered under the statute receives ‘entitlements’ as long as they meet the statutory criteria. Entitlements include compensation for lost earnings, lump sum compensation for permanent impairment, treatment, and social and vocational rehabilitation. The bar on proceedings is found in s 317 of the 2001 Act.

5 Exceptions include proceedings for exemplary damages (see Couch v Attorney-General (No 2) [2010] NZSC 27, [2010] 3 NZLR 149) and cases of psychiatric illness that do not receive cover under the scheme (see Queenstown Lakes District Council v Palmer [1999] 1 NZLR 549 (CA) and van Soest v Residual Health Management Unit [2000] 1 NZLR 179 (CA)).

6 Wall, J ‘No-fault compensation and unlocking tort law's “reciprocal normative embrace”’ (2016) 27 NZULR 125Google Scholar at 126.

7 For the first proposition see Palmer, G ‘New Zealand's accident compensation scheme: twenty years on’ (1994) 44 UTLJ 223CrossRefGoogle Scholar at 247–253. For the latter see Palmer, G Compensation for Incapacity (Oxford University Press, 1979) p 64Google Scholar. See ‘The idea of access to justice’, above n 2, at 201.

8 A return to the right to sue was raised in a report commissioned by the New Zealand Business Roundtable, see Thomson, C et al. Accident Compensation: Options for Reform (New Zealand Business Roundtable, 1998) pp 85–156Google Scholar and has been suggested by some academics, see Mahoney, R ‘New Zealand's accident compensation scheme: a reassessment’ (1992) 40 American Journal of Comparative Law 159CrossRefGoogle Scholar and Miller, R ‘The future of New Zealand's accident compensation scheme’ (1989) 11 U Hawaii LR 1Google Scholar. Compare Cane, P and Atiyah, P Atiyah's Accidents, Compensation and the Law (Cambridge: Cambridge University Press, 7th edn, 2006) pp 471–472Google Scholar and the New Zealand Law Commission's response to Miller in (1990) 12 U Hawaii LR 339 at 342.

9 See Fischer, DH Fairness and Freedom: A History of Two Open Societies New Zealand and the United States (New York: Oxford University Press, 2012) p 472Google Scholar and Wendel, WB ‘Political culture and the rule of law: comparing the United States and New Zealand’ (2012) Otago LR 663Google Scholar at 691–692.

10 Palmer, G ‘Commentary’ in Epstein, R (ed) Accident Compensation: The Faulty Basis of No-fault and State Provision (New Zealand Business Roundtable, 1996) p 22Google Scholar, and ‘The future of community responsibility’ (2004) 35(4) VURLW 905 at 912, and Clayton, A ‘Some reflections on the Woodhouse and ACC legacy’ (2003) 34 VUWLR 449Google Scholar at 457.

11 Wall, above n 6, at 125–126.

12 Ibid, at 142–144.

13 See, for example, Lamm, F et al. ‘The rhetoric versus the reality: New Zealand's experience rating’ (2012) 38(2) New Zealand Journal of Employment Relations 21Google Scholar at 22–23.

14 Royal Commission of Inquiry into Compensation for Personal Injury in New Zealand Compensation for personal injury in New Zealand; Report of the Royal Commission of Inquiry (Wellington: 1967), hereafter ‘Woodhouse Report’.

15 See McKenzie, P ‘The compensation scheme no one asked for: the origins of ACC in New Zealand’ (2003) 34 VUWLR 193Google Scholar.

16 Woodhouse Report, above n 14, p 1. The Report omitted the Criminal Injuries Compensation Scheme, which provided compensation to injured victims of crime in some circumstances, see McKenzie, above n 15, at 195 and Connell, S ‘Justice for victims of injury: the influence of New Zealand's accident compensation scheme on the civil and criminal law’ (2012) 25 NZULR 181Google Scholar at 186.

17 Woodhouse Report, above n 14, pp 49 and 50. See Wall, above n 6, at 130–133 for a sound critique of these arguments.

18 This is made clear in the summary of the principle of community responsibility in the summary chapter of the report: ‘the nation has not merely a clear duty but also a vested interest in urging forward the physical and economic rehabilitation of every adult citizen whose activities bear upon the general welfare’. Woodhouse Report, above n 14, p 20.

19 Ibid, p 40.

20 Ibid, p 40.

21 Ibid, p 40.

22 Ibid, p 40. The Report makes the exception that ‘the elderly and the young … cannot reasonably expect to be provided with a form of social insurance on the same level’. This means, for example, that non-earners cannot necessarily expect to receive compensation for lost earnings in the same way that earners would.

23 Ibid, p 40. There is room to argue over whether the primary focus on rehabilitation actually carried through to the Report's specific recommendations.

24 Ibid, p 41.

25 For an example of how focusing on the words ‘administrative efficiency’ without appreciating the context can lead to a misunderstanding of the principle, see R Kerr ‘ACC monopoly: an idea whose time has passed’ The Dominion Post (New Zealand, 2 November 2009), available at the New Zealand Initiative research archive at https://nzinitiative.org.nz/insights/opinion/acc-monopoly-an-idea-whose-time-has-passed/: ‘Administrative efficiency? Any insurer can hold down administrative costs if they don't properly investigate and monitor claims’.

26 See Easton, B ‘The historical context of the Woodhouse Commission’ (2003) 34 VUWLR 207Google Scholar at 211 and ‘The idea of access to justice’, above n 2, at 226.

27 Woodhouse Report, above n 14, p 59.

28 Ibid, p 41. Emphasis added.

29 See Littlewood, M ‘The history of death duties and gift duty in New Zealand’ [2012] NZJTLP 66Google Scholar at 67 for a similar approach to defining left and right in New Zealand in a different context.

30 See Reitz, JC ‘Political economy as a major architectural principle of public law’ (2001) 75 Tul L Rev 1121Google Scholar at 1123–1124.

31 Atkinson, N ‘New Zealand politics 1935 to 1984’ in Hayward, J (ed) New Zealand Government and Politics (Melbourne: Oxford University Press, 6th edn, 2015) pp 15–24Google Scholar.

32 B Roper ‘New Zealand politics post-1984’ in Hayward, above n 31, p 28.

33 Nagel, JH ‘Social choice in a pluralitarian democracy: the politics of market liberalization in New Zealand’ (1998) 28 British Journal of Political Science 223CrossRefGoogle Scholar.

34 See M Baker ‘Family welfare – family policy, 1980–1999’ (Te Ara – the Encyclopedia of New Zealand), available at https://www.TeAra.govt.nz/en/family-welfare/page-6 accessed 24 April 2019.

35 Roper, above n 32, pp 25 and 32–33.

36 See Piercy, G et al. ‘Investigating commentary on the fifth labour-led government's third way approach’ (2017) 32(1) NZ Sociology 51Google Scholar.

37 See M Baker and R Du Plessis ‘Family welfare – family welfare in the 21st century' (Te Ara – the Encyclopedia of New Zealand), available at https://www.TeAra.govt.nz/en/family-welfare/page-7, accessed 24 April 2019.

38 Roper, above n 32, p 25.

39 See Baker and Du Plessis, above n 37.

40 It is not the case where one party started supporting the scheme with the other opposing it, and at some point they switched sides – compare to the situation with tort in the USA described in Sugarman, SD ‘Ideological flip-flop: American liberals are now the primary supporters of tort law’ in Essays on Tort, Insurance, Law and Society in Honour of Bill W Dufwa (Vol 2, Jure Förl, 2006) p 1105Google Scholar.

41 Woodhouse Report, above n 14, p 107.

42 Woodhouse Report, above n 14, p 17. The justification for excluding illness was pragmatic: the issue of injury was seen as a more urgent need. The Report suggested that ‘the proposals now put forward for injury leave the way entirely open for sickness to follow whenever the relevant decision is taken’. For further discussion see Chapman, JT Review by Officials Committee of the Accident Compensation Scheme (Wellington: 1986)Google Scholar and New Zealand Law Commission Report on the Accident Compensation Scheme, Personal Injury: Prevention and Recovery (Wellington: NZLC R4, 1988).

43 The case is perhaps even stronger for illness caused by human activities: see Hook, M ‘New Zealand's accident compensation scheme and man-made disease’ (2008) 39(2) VUWLR 289Google Scholar at 293–294 and 299–301.

44 See Oliphant, K ‘Beyond Woodhouse: devising new principles for determining ACC boundary issues’ (2004) 35 VUWLR 915Google Scholar at 926–935 for a discussion of ways of extending the scope of ACC without fully embracing community responsibility.

45 For example, the Woodhouse Report states that drivers of motor vehicles should provide some additional contribution to the funding of the scheme: Woodhouse Report, above n 14, p 174.

46 Ibid, p 135.

47 The latter benefit can also be achieved to some extent by allowing employers to insurance against liability in a fault-based system.

48 This distinguishes the ‘compulsory insurance’ conception of ACC from systems that require, or strongly encourage, insurance with less generous benefits, for example the scheme implemented by The Patient Protection and Affordable Care Act (USA). See Obama, B ‘United States health care reform/progress to date and next steps’ (2 August 2016) 316(5) JAMA 525CrossRefGoogle ScholarPubMed for a discussion of that scheme.

49 Cane and Atiyah, above n 8, p 473.

50 Although there are some cases where a person can have ACC cover from birth due to an injury to the mother, see Harrild v Director of Proceedings [2003] 3 NZLR 289 (CA).

51 See Oliphant, above n 44, at 935.

52 Risk is a different concept from fault. See Wall, above n 6, at 142–143.

53 Sourgens, FG ‘The virtue of path dependence in the law’ (2016) Santa Clara Law Review 306Google Scholar. See further Hathaway, O ‘Path dependence in the law: the course and pattern of legal change in a common law system’ (2001) 86 Iowa LR 601Google Scholar.

54 Department of Labour A Commentary on the Report of the Royal Commission of Inquiry into Compensation for Personal Injury in New Zealand (Wellington, 1969) p 45.

55 One major concern was cost, see GF Gair ‘Report of select committee on compensation for personal injury in New Zealand’ I AJHR [1970] I15 at 21–22. See Cane and Atiyah, above n 8, p 446.

56 Including the self-employed.

57 See Palmer (1979), above n 7, p 21.

58 Chapman, above n 42.

59 Royal Commission on Social Policy Report of the Royal Commission on Social Policy (Wellington: 1988).

60 New Zealand Law Commission, above n 42. The government essentially invited the recommendation of the extension of the scheme to illness by asking the Law Commission (then chaired by Sir Owen Woodhouse) to comment on whether the current scheme was operating in accordance with the principles laid down in the Woodhouse Report, see terms of reference at viii.

61 See Palmer (1994), above n 7, at 235.

62 Ibid, at 235.

63 Rehabilitation and Incapacity Bill 1990.

64 Littlewood, M ‘Why does the accident compensation corporation have a fund?’ in Pension Commentary (University of Auckland Business School 2009) p 3Google Scholar.

65 See Accident Compensation Corporation Statement of Intent 2015–2019 (Accident Compensation Corporation, 2015) p 19.

66 See Clayton, above n 10, at 461: ‘Pure pay-as-you go funding is philosophically more appropriate for a comprehensive, state fund scheme as the ACC’.

67 John, S St ‘ACC the lessons from history’ (2010) 6(1) Policy Quarterly 23Google Scholar at 24; see further Littlewood, above n 64, p 18.

68 John, S St ‘Accident compensation in New Zealand: a fairer scheme?’ in Boston, J et al. Redesigning the Welfare State in New Zealand: Problems, Policies and Prospects (Oxford University Press, 1999) p 158Google Scholar. See also Clayton, above n 10, at 460 for the argument that actuarial calculation is ‘eductively alluring in theory, it is largely chimerical in practice … almost as pointless as the debate in mediaeval scholasticism as to the number of angels that can dance on the head of a pin’.

69 See Rennie, D ‘Administering accident compensation in the 1980s’ (2003) 19 VUWLR 329Google Scholar at 348.

70 Birch, Hon WF Accident Compensation: A Fairer Scheme (Wellington, 1991) p 28Google Scholar. Shifting from pay-as-you-go to fully-funded means that, as well as collecting levies for the future cost of accidents suffered in a particular year, the scheme would also need to build up a fund for the future cost of injuries suffered during the pay-as-you go period. This was done when full-funding was brought back in in 1998, and it took until 2015 to build up the funds for the future costs of the pay-as-you-go period. See N Kaye ‘ACC reaches milestone as residual levies removed’ (Press Release, New Zealand Government, 22 September 2015).

71 St John, above n 67, at 27.

72 St John, above n 67, at 28.

73 V Small ‘Little: change ACC illness “injustice”’ Stuff (New Zealand, 5 November 2012), available at www.stuff.co.nz/national/politics/7907461/Little-Change-ACC-illness-injustice, accessed 24 April 2019.

74 See Morning Report ‘Labour leader says fully funded ACC is not needed’ (Radio New Zealand, 12 May 2015), available at https://www.radionz.co.nz/national/programmes/morningreport/audio/201753959/labour-leader-says-fully-funded-acc-is-not-needed, accessed 24 April 2019.

75 New Zealand Labour Party Manifesto 2017: Accident Compensation (New Zealand Labour Party, 2017).

76 New Zealand Green Party Accident Compensation Policy, available at https://www.greens.org.nz/page/accident-compensation-policy, accessed 24 April 2019.

77 Ministerial Working Party on the Accident Compensation Corporation and Incapacity Report (1991) 51 and First Supplementary Report (1991), Birch, above n 70.

78 See Report, ibid, at [14] and Birch, above n 70, p 16.

79 See Report, above n 77, at [16].

80 Birch, above n 70, pp 10–15.

81 Birch, above n 70, p 8.

82 See, for example, St John, above n 68, pp 162–163, Mahoney, above n 8, at 210 and Miller, R ‘An analysis and critique of the 1992 changes to New Zealand's accident compensation scheme’ (1992) 5(1) Canterbury Law Rev 1Google Scholar at 1–2.

83 Section 73 of the original 1972 Act provided a form of experience rating in that levies could be increased by up to 100% or decreased by up to 50% for employers whose accident record was ‘significantly’ worse or better the norm for their class. The strict ‘significantly’ requirement proved unworkable and s 73 was later amended to give ACC a broad discretion to adjust levies based on employers’ ‘accident experience’: see John, S St ‘Safety incentives in the New Zealand accident compensation scheme’ (1981) 15(1) New Zealand Economic Papers 111CrossRefGoogle Scholar at 115. St John's paper also provides a critique, at 123–125, of this use of employer accident records. ACC did make some cautious and exploratory use of the revised power in the early 1980s, but the practice was abandoned a few years later with no reason given, see Lamm et al, above n 13, at 28 and Campbell, I Compensation for Personal Injury in New Zealand: Its Rise and Fall (Auckland University Press, 1996) pp 205–208Google Scholar.

84 See Miller, above n 82, at 14–15.

85 ‘The idea of access to justice’, above n 2, at 202.

86 1992 Act, ss 8, 3 and 4 (2001 Act, ss 20, 25 and 26).

87 1992 Act, s 3, definition of accident (b).

88 Accident Insurance Amendment Act 2000 and Accident Insurance (Transitional Provisions) Act 2000.

89 ‘Treatment Injury’ cover (Injury Prevention, Rehabilitation and Compensation Amendment Act 2005), ‘work-related mental injury’ (Injury, Prevention, Rehabilitation and Compensation Amendment Act 2008).

90 At least, vehicles that are deemed to be safer based on make and model.

91 80% of the higher of: the minimum wage or 125% of the invalid's benefit, see 2001 Act, Schedule 1, cl 42(3) and 47(4).

92 Murray & Others v ACC [2013] NZHC 2967 at [65] and [69]. See also ACC v Vandy [2011] 2 NZLR 131 (HC) and Giltrap v ACC DC Wellington 141/206, 9 June 2006.

93 See Giltrap at [22] and Murray at [69].

94 I Lees-Galloway ‘Labour promises a fairer ACC for all Kiwis’ (Press Release, New Zealand Labour Party, 8 August 2014).

95 J Collins ‘Labour's ACC policy treats employers as bottomless money box’ (Press Release, New Zealand Government, 8 August 2014).

96 See WorkSafe New Zealand Towards 2020 Progress Towards the 2020 Work-Related Injury Reduction (Wellington: November 2017) p 4.

97 Health and Safety at Work Act 2015; see Royal Commission on the Pike River Coal Mine Tragedy Royal Commission Report (Wellington: October 2012).

98 Towards 2020, above n 106, at 6–7.

99 T O'Sullivan and K Tokeley ‘Consumer product failure causing personal injury under the no-fault accident compensation scheme in New Zealand – a let-off for manufacturers?’ (2018) Journal of Consumer Policy, published online 10 August 2018.

100 Gaskins, R ‘The fate of “no-fault” in America’ (2003) 34 VUWLR 213Google Scholar at 214 and K Oliphant ‘Accident compensation in New Zealand’, available at https://www.courdecassation.fr/IMG/File/pdf_2006/05-12-2006_assurance/05-12-06_ken_oliphant-en.pdf, accessed 23 April 2019, at 17 and ‘Landmarks of no-fault in the common law’ in WH van Boom and M Faure (eds) Shifts in Compensation (vol III): Between Private and Public Systems (Springer, 2007) p 79. Compare Engstrom, N Freeman ‘An alternative explanation for no-fault's “demise”’ (2012) 61 DePaul LR 303Google Scholar.

101 Fischer, above n 9; compare Wendel, above n 9.

102 Kagan, RA Adversarial Legalism (Cambridge, Mass: Harvard University Press, 2001) pp 10–11Google Scholar.

103 Palmer (1979), above n 7, p 89.

104 Sentencing Act 2002 (NZ), s 12.

105 Davies v Police [2009] NZSC 47, [2009] 3 NZLR 189.

106 Sentencing Amendment Act 2014. See Connell, S ‘Overturning the social contract?’ [2014] NZLJ 314Google Scholar.